Property Manager – Winnetka

Tips to Collect Rent On-Time

Tip 1: Have clear communication with tenants

This is extremely important if you want to discourage bad rent-paying habits (although clear communication is important for all aspects of being a landlord). Straightforward information about rent, due dates, late fees, and possible consequences for late rent will accomplish two things.First, it will help prevent any confusion in the mind of the tenant about any of these topics. You can then avoid dealing with tenants who paid late simply because they didn’t know when rent was due or didn’t understand the repercussions for doing so. Second, if a dispute ever comes to legal blows, you’ll be placed in a far better position if you can demonstrate that you clearly relayed to the tenant when rent was due and the consequences of not paying on time. How can you prove that you did this? One way is to have every adult person on a new lease initial and date every page of the lease, and to do the same yourself. Distribute copies to everybody who initialed it. That way, you’ll be able to point to the page with the relevant information about late rent and prove that it was agreed upon by all.

Tip 2: Have a late fee

Charging an additional fee for late rent can help ensure that tenants are financially motivated to pay on time, especially for frugally-minded folks. Exact rules about how much you can charge vary from place to place, so you’ll want to check local statutes. As an example, Chicago landlords are allowed to charge a maximum of $10 per month on the first $500 of late rent plus 5% per month on the portion of the rent over $500. That means if you were to have a $1500/month lease, you could charge a late fee of $10 + $50 = $60. This is a legal maximum.

Should you always charge the maximum allowable late penalty? There are a few schools of thought about how much to charge. One idea is to charge a relatively steep amount to discourage repeated infractions. If tenants are consistently late, a penalty that’s too small may not correct the negative behavior. Some landlords and professional property managers insist on using the late fee as a mechanism to discourage future bad behavior.

On the other hand, the director of the Tenants Legal Center of San Diego had this to say in an article from the MSN real estate blog: “The purpose of the late fee is an attempt to try and compensate the landlord for the inconvenience or cost associated with a late payment… It is not meant to be a bully stick waved at the tenant. The idea that I’m going to whip you each day you don’t pay, that’s not the intent of the law.” In this viewpoint, the late fee should just represent the time and total cost incurred in order to collect the rent and handle the late payment.

Don’t forget! You’ll need to ensure that a clause about late rent is in the lease, and you may want to include information about it in any sort of introductory material you give a new tenant. Be sure to mention it when you go over the lease with the tenant. If the late fee isn’t included in the lease, it isn’t legal to impose one after the lease is signed.

As a related side note, if you’re really motivated to get someone to pay, there’s always the option for you to report late payments to credit bureaus. This will negatively affect the offending tenant’s credit score. As per tip 1, communicating this possibility and/or your intent to do so before actually reporting anything may convince a tenant to pay up rather than risk ruining their credit score.

Tip 3: Be consistent

Consistency is another of the best policies you can have as a landlord, and is especially helpful in preventing late rent, which may occasionally come from even the best tenant. The reason could range from pure forgetfulness to financial woes. As unfortunate and personally tragic their situation may be, it’s truly best to treat all situations equally– with professionalism and an eye towards the bottom line of your business. While it’s easy to prosecute generally bad tenants and act more leniently towards good ones, it shouldn’t affect the steps you take. You can of course personally sympathize with their situation, but separate that emotion from your landlording policies.

Keeping your policies consistent will discourage tenants from thinking they can get special treatment and therefore reduce the likelihood of them burdening you with special requests. The last think you want is for a small pardon you gave to your tenant once to become a normality for that tenant and other tenants.

Tip 4: Always act professional

Although having to jump through hoops to collect late rent is frustrating, it is to your advantage to remain as professional as possible. Never threaten to cut off utilities and don’t rely on threats in general, no matter how vague they may be. Doing so can only sour the relationship you have with your tenant and push them to intentionally make things difficult for you. Threats or personal attacks against your tenants also make you look unprofessional and and are very unlikely to be tolerated by a judge.

When Breakdowns Occur

Sometimes, despite your best efforts of encouragement to the contrary, a tenant will still pay late, maybe even multiple times. There are several options you have available at this point which graduate in severity based on how late the payment is. To get a full, in-depth view at these, visit our other post “How to Handle Tenants Who Pay Late Rent”, but we’ve listed a basic outline of the steps you should take.

As soon as the 3 or 5 day grace period ends, be prompt in delivering a Late Rent Notice, or Notice to Pay Rent or Quit to the tenant. Technically this begins the eviction process, but your tenants must know that you’re serious. If you get to this point, you’ll want to call a lawyer and be prepared for a long legal battle.

From: www.rentalutions.com

Carnahan Property Management Services Woodland Hills,West Hills,Bell Canyon, Hidden Hills, Calabasas, Canoga Park, Tarzana, Reseda, Topanga, Encino, Northridge, Van Nuys,North Hills,Chatsworth, Sherman Oaks, Studio City, North Hollywood, West Hollywood, San Fernando Valley, Granada Hills, Mission Hills, Simi Valley, WestLake Village, Agoura,Toluca Lake, Valley Village, Burbank. Call us at (818) 884-1500 to check if we can service your area. 60+ years of service.